5 ms·
What would Milton Friedman do now?
- deleted 16y ago[deleted]
- pierrefar 16y ago"The Friedman logic, though, makes the case for QE2." but only just after going through uncertainty and points against. The way the article is written sounds like the author wanted the conclusion regardless.
- jbooth 16y agoWell, I'd hope it was after going through uncertainty and points against. Otherwise, how do you know if the idea's any good?
- _stephan 16y agoShort reply by Krugman: http://krugman.blogs.nytimes.com/2010/10/28/friedman-on-japan/ http://krugman.blogs.nytimes.com/2010/10/28/friedman-on-japa...
- Isamu 16y agoI found this helpful, as I am not familiar with the term: http://en.wikipedia.org/wiki/Liquidity_trap http://en.wikipedia.org/wiki/Liquidity_trap
- joelmichael 16y agoFriedman would definitely support the Fed's actions. Bernanke is a loyal Friedman acolyte. The "Helicopter Ben" reference comes from him quoting Friedman's term for creating money to prevent deflation: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/200211... He credits the Fed's failure to do what it is doing now with causing the Great Depression in this speech: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/200211... Friedman explains this himself in the following clip from his television series: http://www.youtube.com/watch?v=9V5OP-VmXgE http://www.youtube.com/watch?v=9V5OP-VmXgE
- fexl 16y agoFriedman also conceived of income tax withholding and what he called the "negative income tax," now known as EITC. It does not surprise me that he would advocate Monetary Mischief as well. The QE arguments are an example of magical thinking. Incomes are falling, so increment some numbers in the memory of a computer and that will fix it. Never mind the realities of Human Action. Real incomes rise when people become more productive, and that happens when they have more and better tools (capital) at their disposal and more incentive to produce. No one achieves that by printing Monopoly money. "Each dollar the Fed prints has less oomph." Yes, they are pushing on a string, and those dollars do not impress me. To those who feast at the government trough, may you eat dollars!
- joelmichael 16y agoEITC isn't really the same thing as the basic income/negative income tax. The basic income has no means test whatsoever, whereas the EITC does. Check out the wiki on it. Also, most economists support the basic income as the ideal system of welfare (as confirmed in the article this thread is about), and it is intended to replace all other forms of welfare, including Social Security and Medicare. Tax withholding was done during WW2 and before Friedman had changed his views considerably. But monetarism is his crowning achievement, it is what he is best known for, and where he was most influential. Friedman beat inflation and solved the mystery of the Great Depression.
- bjnortier_hn 16y agoIf you watch his "Free to choose" series (http://www.ideachannel.tv/ http://www.ideachannel.tv/), Friedman blamed the Fed for the depression because they didn't keep the money supply stable. Because of bank failures the money supply decreased by a 3rd. He never advocated massively increasing the money supply. In fact, he has been consistently against printing money because of it's leading to inflation. You can interpret his comments on the BOJ in the article that he would support buying government bonds only as a way to provide liquidity to banks. In the current US scenario, the banks and corporations have enough capital, so I cannot see that Friedman would support QE2. P.S. "Friedman believed in the power of money". Nonsense. He believed in the power of individual freedom.
- CWuestefeld 16y agoI don't understand the downvote for this (so I voted it back to 1). Generally speaking, the idea expressed here matches my own understanding (though I'm more specifically familiar with Hayek and Mises). Can anyone explain why bj_nortier_hn is wrong?
- bjnortier_hn 16y agoDownvoting it without posing a counter-argument doesn't help me in examining my own subjective beliefs. If I'm wrong, I want to know why.
- deleted 16y ago[deleted]
- nerfhammer 16y agoSorry, I don't think that is accurate. Quoting wikipedia: "[Friedman] claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did. With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing." Intervening to prop up failing banks and creating money to buy bonds? Sounds a lot like... TARP.
- binarray2000 16y agoEnough about John Maynard Keynes. We can be sure the 20th century British economic giant would advise more government spending to spur U.S. economic growth with consumers and businesses so hesitant and short-term interest rates at zero. Indeed, enough... we don't want to be remembered anymore that he would advise us to save money in good times so we can spend it when the times get bad. And we're spending it in both good and bad times.